Southwest Airlines 2013 Annual Report Download - page 120

The Consolidated Statement of Income for the years ended December 31, 2013, 2012, and 2011, reflects
share-based compensation expense of $18 million, $16 million, and $13 million, respectively. The total tax
benefit recognized in earnings from share-based compensation arrangements for the years ended December 31,
2013, 2012, and 2011, was not material. As of December 31, 2013, there was $22 million of total unrecognized
compensation cost related to share-based compensation arrangements, which is expected to be recognized over a
weighted-average period of 1.1 years.
Restricted stock units and stock grants
Under the Company’s Amended and Restated 2007 Equity Incentive Plan (“2007 Equity Plan”), it granted
restricted stock units (“RSUs”) to certain Employees during 2011, 2012, and 2013. In addition, the Company
granted approximately 63 thousand shares of unrestricted stock at a weighted average grant price of $14.34 in
2013, approximately 82 thousand shares at a weighted average grant price of $8.21 in 2012, and approximately
33 thousand shares at a weighted average grant price of $12.26 in 2011 to members of its Board of Directors. The
fair value of RSUs and unrestricted stock grants is based on the closing price of the Company’s common stock on
the date of grant. Outstanding RSUs vest over three years, subject to the individual’s continued employment or
service. The Company recognizes expense on a straight-line basis over the vesting period. A remaining balance
of up to 10 million shares of the Company’s common stock may be issued pursuant to grants under the 2007
Equity Plan. Aggregated information regarding the Company’s RSUs is summarized below:
RESTRICTED STOCK UNITS
Units (000)
Wtd. Average
Fair Value
Outstanding December 31, 2010 ................................ 990 $ 12.28
Granted .................................................... 1,007 12.27
Vested ..................................................... (327) 12.28
Surrendered ................................................ (30) 12.28
Outstanding December 31, 2011 ................................ 1,640 12.27
Granted .................................................... 1,939 8.21
Vested ..................................................... (644) 12.27
Surrendered ................................................ (59) 10.54
Outstanding December 31, 2012 ................................ 2,876 9.57
Granted .................................................... 1,139 14.34
Vested ..................................................... (1,263) 10.24
Surrendered ................................................ (168) 9.11
Outstanding December 31, 2013 ................................ 2,584 $ 11.38
Stock options
The Company has previously awarded stock options under plans covering Employees subject to collective
bargaining agreements (collective bargaining plans) and plans covering other Employees and members of the
Board of Directors (other Employee plans). None of the collective bargaining plans were required to be approved
by Shareholders. Options granted to Employees under collective bargaining plans are non-qualified, granted at or
above the fair value of the Company’s common stock on the date of grant, and generally have terms ranging from
six to twelve years. There were no material grants of stock options to Employees covered by collective
bargaining plans during 2011, 2012, or 2013. Neither Executive Officers nor members of the Company’s Board
of Directors are eligible to participate in any of the collective bargaining plans. Options granted to Employees
and members of the Board of Directors through other Employee plans are both qualified as incentive stock
options under the Internal Revenue Code of 1986 and non-qualified stock options, granted at no less than the fair
value of the Company’s common stock on the date of grant, and have 10-year terms. All of the options included
in other Employee plans have been approved by Shareholders, except one plan covering non-management, non-
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